Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Hansard source

in reply—I would like to thank all of those members, including the member for Bonner, who have participated in the debate on the First Home Saver Accounts (Further Provisions) Amendment Bill 2008 and the First Home Saver Account Providers Supervisory Levy Imposition Bill 2008. These two bills implement the final parts of the First Home Saver Accounts scheme, following legislation passed in this place in June 2008. The finalisation of the scheme marks an important new beginning in housing policy in Australia, as the member for Bonner was saying. Homeownership is important to the wellbeing of Australians, and the accounts will help Australians to once again realise the dream of homeownership.

The biggest barrier to homeownership is of course saving a deposit. First home saver accounts will provide a tax-effective way for Australians to save through a combination of a 17 per cent government contribution and a low, 15 per cent tax rate on earnings. For example, a couple each earning average incomes and each putting aside 10 per cent of their income into individual first home saver accounts would be able to save more than $88,000 after five years. This is almost $13,000 more than they would otherwise have saved.

The main features of the accounts include the following. An individual can open an account if they are aged 18 or over and under 65, have not previously purchased or built a first home in which to live, do not have or have not previously had a first home saver account and provide their tax file number to the provider. Personal contributions can be made by the account holder or another party and can only be made from after-tax income. The account is supported by government contributions. The government will contribute an extra 17 per cent on the first $5,000 of personal contributions made into the account each year. This will be indexed to average weekly ordinary time earnings. This means that an individual contributing $5,000 will receive a government contribution of $850. There is an overall account balance cap of $75,000, which is indexed to average weekly ordinary time earnings. Earnings can still accrue once the cap is reached. As a general rule, in order to access money to purchase a first home, personal contributions of at least $1,000 must have been made in each of at least four financial years.

Individual contributions are not taxed, as they are made from after-tax income. Government contributions are not taxed and withdrawals to purchase a first home are not taxed. In addition, earnings on account balances are taxed at the account provider level, at the statutory rate of 15 per cent, rather than in the hands of the individual account holder at their marginal tax rate.

I would like to address some of the points that have been raised in this debate by the opposition. Contrary to the member for Farrer’s assertion, $5,000 is not the maximum contribution which can be made to an account. There is no limit to the contributions an individual can make each year. The only limit is the account balance cap of $75,000. The member for Riverina also was mistaken when she said that Labor were trashing the first home owners grant. First home saver accounts will operate in addition to first home owners grants, and having an account will not affect an individual’s eligibility to receive a grant.

Members opposite also made mention of an article regarding the number of potential providers. The media reports are based on a public list, which was maintained by APRA, of those entities which have registered with them to provide first home saver accounts. It is not a complete list of those entities intending to offer first home saver accounts. Discussions with major banks indicate that at least two of the four banks will be offering first home saver accounts from 1 October 2008, and 16 other ADIs, including many credit unions, have registered with APRA to offer first home saver accounts. Some of these credit unions are very substantial financial institutions and should not be ridiculed, as they have been by some.

Contrary to the opposition’s assertions about these providers being obscure, some of the largest credit unions have registered an interest, including the New South Wales Teachers Credit Union, with over 150,000 members, and the Defence Force Credit Union, with over 80,000 members. The banking industry has been supportive of the first home saver accounts, has been working closely with the government and Treasury portfolio agencies and has been ready to offer first home saver accounts from 1 October.

The government’s First Home Saver Accounts initiative is part of Labor’s responsible approach to economic management, as it encourages younger Australians to save. The government is investing about $1.2 billion over four years on the First Home Saver Accounts policy, including administrative costs. This is part of a package of measures, costing $2.2 billion over four years, to boost housing supply and to assist those most in need; namely, first home buyers and renters on low and moderate incomes. This package includes the Housing Affordability Fund, which will also assist local governments to reduce the costs of providing new housing related infrastructure and improving planning processes; the National Rental Affordability Scheme, which will provide investors with incentives to construct rental housing for low- to middle-income households, with rents 20 per cent below the market level; and of course a better approach to land release, with the identification of surplus Commonwealth land to be developed into additional new housing.

Turning briefly to the changes made by these bills, the bills make a number of second order changes, including a scheme for dealing with unclaimed money; amendments to secrecy and information sharing between the ATO, APRA and ASIC; and a mechanism for dealing more comprehensively with the interaction between first home saver accounts and family law. The bills also introduce a framework for imposing a supervisory levy to fund the Australian Prudential Regulation Authority’s supervision of account providers on a user-pays basis.

These measures that the government are taking are aimed at improving the affordability of housing for all Australians. The government are very proud of this very important initiative. It is the first one in our history. It is one that we support very strongly, and we hope that those in the opposition who have been critical will now get behind what is a very constructive measure which will assist young Australians to save for a home.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.

See this speech in context